Question

Answer in details.
What are the secondary functions of commercial banks or subsidiary functions?

Answer 1

The secondary functions of a commercial bank are acting as an agent to its customers and also providing general utility services.

1. Commercial banks perform agency function for its customers by providing them the following basic facilities at an agreed bank charge depending on the nature of the activity:

• They collect bills, draft, cheques etc.
• They pay the insurance premium, rent, loan installments, etc.
• They work as a representative of a customer for purchasing or redeeming different types of securities in the stock exchange.
• They also prepare income tax returns, claim tax refunds, etc. on behalf of the customers.

2. Commercial banks perform general utility function by providing the following facilities to its customers:

• Issuing traveler cheque: A traveler's cheque is a medium of exchange that can be used in place of hard currency which is denominated in one of a number of major world currencies in a fixed amount which is generally used by the people going on vacations to foreign countries.
• Offering a safe deposit vault: A safe deposit vault also know as a safe deposit box is an individual secured metal container held within a larger safe which is provided to all the bank account holders of all the banks who offer such services in order to keep their valuable things like accessories and important papers safely and securely with the bank.
• Issuing debit cards and credit cards are electronic cards that can be used to withdraw money without going to the banks and also to make payments at the time of purchasing any goods and services.